CH13 100% Repayment - Payment Calculation

[Ready2BDone]

Hello!

I'm coming here for help as its been over a year since I filed and STILL have no received confirmation from the trustee. My attorney and I keep going back and forth and I'm at my wits end. I need help understanding how a CH13 payment would be calculated.

For background: We essentially blew the means test out of the water and are no where near able to do a CH7. I am filing, my spouse is not. We are in a 100% repayment plan. We provided all sorts of documentation so that forms 122C-1 and 122C-2 could be completed. On the original filing, our disposable income was in the $1800 ballpark. However, we had forgot to include debts only in my spouse's name. Once corrected, an amended schedule was filed and our disposable income was in the $1100 range. My initial understanding was that we would take that disposable income and multiply it by 60, and this would give us the amount that would need to be paid into the plan. Apparently not the case.

My attorney is basically telling me that the disposable income multiplied by 60 gives us the "floor" or the MINIMUM that would have to be paid into the plan. This confuses me. What would be the purpose of the forms noted above to determine our disposable income, if our disposable income doesn't actually matter? We are being told that we would be paying WELL over (by almost $30k) the amount that is derived from multiplying our disposable income by 60. How does that make sense? So if I owed $500,000 in debt, but only had $1,000 in disposable income, my attorney is basically telling me I would have to pay it, because we are considered "above median wage earners". Surely I am missing something. Isn't the whole point of calculating the disposable income to determine what we can afford to pay into the plan? I'm angry, frustrated, stressed and near my breaking point. To top it off, our attorney is also telling us not to "push" our luck with the trustee as they will come back and object to all sorts of stuff. I really feel like there is a huge disconnect between us, the attorney, and the trustee. I'm determined to understand this because the plan he is saying we would have, contains a payment we simply cannot afford. We are already paying a couple hundred more than the government's own forms say we have leftover at the end of the month.

Please help. Whatever information you can give to help me understand where this disconnect is would be so greatly appreciated. I am ready to get this plan confirmed and move on!

Thank you all in advance!

[justbroke]

Welcome to BKForum.

In many bankruptcy districts, the calculation done by the Means Test (B122C-1 and B122C-2), to reach the disposable monthly income (DMI) is considered the "starting point of the inquiry" (as mentioned by many judges in their opinions). Since the landmark Lanning case -- which went ot the Supreme Court -- Schedules I and J are the "forward looking" analysis which completes the inquiry. I never think of the Means Test as the floor, but some courts and Chapter 13 Trustees like to do so.

If you are married but the only one filing, then your Means Test (B122C-1 and B122C-2) should show the marital adjustment. If that brings you down to $1,100 of DMI, then you would pay $1,100 a month for the duration of the plan. Personally, I don't like to multiply it by the plan duration, because that value can go up or down unless you're in a 100% plan.

Everything I wrote above is for an "easy" plan. And here comes the outliers.

If, after performing what is known as the "Chapter 7 liquidation test" (a/k/a the best interest of creditor's test), it is found that Chapter 7 would have yielded more money, then that's the minimum you have to pay in a Chapter 13.

So let's use some of your information as an example. Let's say your DMI is $1,100 and multiplied out that's $66,000. That's the starting point. Even your Schedule I and Schedule J show that you only have DMI of $1,100. That's perfect, but that's not the end of the inquiry. The liquidation test is important for this reason. If you have equity of $100,000 in your home and it's not exempt, the "minimum" amount that you must provide to the unsecured creditors over the life of the plan is $100,000 or 100% of their claims, whichever is less.

So the question is, are you keeping property (cars, boats, investment/rental properties, and homestead property) that is worth more than your available exemptions? That would force you to pay 100% or more than what shows in your calculation of your DMI. This is what makes some Chapter 13 plans complex because there's more here than meets the eye.

[Ready2BDone]

Thanks, justbroke! I can confirm that I am in a 100% repayment plan. Or a 150% plan, it feels like. Where in my filing would I find the Chapter 7 liquidation test? I don't see anything named similar. I haven't heard any explanation that references it either (as far as why our plan payment is where it is). We are keeping our house and vehicle. However, I went back and looked at my filing. We've only owned our home for 3 years, so there isn't a ton of equity. Everything that is listed in the personal property section of the form, is also listed in the exempt section of the form. The one thing I do notice, is that for other exemptions (checking accounts, 401K, etc), the dollar amount listed as exempt matches the dollar amount of the property value. The entries for our house and vehicle are listed as exempt, but with $0. Does that mean that the value is worth more than the available exemptions? I don't see anything that specifically calls out that scenario, and again, the attorney hasn't mentioned that being the case.

EDIT: I went back and looked at my schedule I and J. Schedule J lists our net income at $900.

I am considering a new attorney...but was hesitant since I'm already a year into with this attorney. In the original filing, my DMI was $1800, which is the figure that is constantly referenced when he discusses my plan. Its like he completely ignores the fact that an amended schedule was filed that dropped the DMI. Even more frustrating, he sent an email as an explanation and told me that "talking with the trustee after I filed the second schedule, the trustee objected to our claiming $1763 as a marital adjustment because the payments include joint debts and regardless, the cards were likely used for household purposes. They wouldn't object to the original marital adjustment of $1100. So its a compromise. If we push further, its very possible the trustee would object to using the original marital adjustment as well, which could cause your payments to increase more". I was FLOORED. If we pay (and can prove it) a certain amount towards my spouse's debt, how can the trustee just pretend that we don't? That money still leaves my bank account every month.

Put it this way. Our disposable income (the amended figure of $1100ish) matches the budget I keep for us in Excel (give or take). That puts us at the $66k figure you mentioned. I am being told that I will have to pay $137,750 into the plan. That is more than double what the form says I have left! I'm completely at a loss. Assuming that the property exceeds the exemption amount. How would I go about verifying that my attorney calculated things correctly? There have been enough errors that I'm not trusting the numbers I'm seeing at all. I need to be able to figure this out for peace of mind that I'm not getting completely screwed over. I appreciate the reply...that helped confirm that at least part of my thought process was accurate!

[justbroke]

Where in my filing would I find the Chapter 7 liquidation test? I don't see anything named similar. I haven't heard any explanation that references it either (as far as why our plan payment is where it is).

The Chapter 7 Liquidation Test is not actually called that in the law. The law is found in 11 USC 1325(a)(4). The bankruptcy industry just calls it the liquidation test because the law reads that a judge "shall confirm" a Chapter 13 plan which "the value, as of the effective date of the plan, of property to be distributed under the plan on account of each allowed unsecured claim is not less than the amount that would be paid on such claim if the estate of the debtor were liquidated under chapter 7 of this title on such date."

I am considering a new attorney...but was hesitant since I'm already a year into with this attorney. In the original filing, my DMI was $1800, which is the figure that is constantly referenced when he discusses my plan. Its like he completely ignores the fact that an amended schedule was filed that dropped the DMI.

When schedules keep getting amended, the Trustee is most interested in the reason why it's being amended. Whenever you file a Chapter 13 and only one of the two married income earners is filing, the Chapter 13 Trustee is very very picky.

Even more frustrating, he sent an email as an explanation and told me that "talking with the trustee after I filed the second schedule, the trustee objected to our claiming $1763 as a marital adjustment because the payments include joint debts and regardless, the cards were likely used for household purposes.

This is actually the Chapter 13 Trustee's job. It is to make sure that you don't double-count expenses or use a marital adjustment for something that you are also claiming as an expense. For example, if your spouse is buying all the food (claiming that they buy the household food), you can't claim household food.

They wouldn't object to the original marital adjustment of $1100. So its a compromise. If we push further, its very possible the trustee would object to using the original marital adjustment as well, which could cause your payments to increase more". I was FLOORED. If we pay (and can prove it) a certain amount towards my spouse's debt, how can the trustee just pretend that we don't? That money still leaves my bank account every month.

As I wrote above, this is what the Chapter 13 Trustee does in cases where only one spouse is filing. They push back to make sure that you can actually prove it and that there is no overlap. (Keep reading...)

Put it this way. Our disposable income (the amended figure of $1100ish) matches the budget I keep for us in Excel (give or take). That puts us at the $66k figure you mentioned. I am being told that I will have to pay $137,750 into the plan. That is more than double what the form says I have left! I'm completely at a loss.

It reads as though the Trustee simply hasn't "agreed" yet as to whether they will allow the amended amount.

Assuming that the property exceeds the exemption amount. How would I go about verifying that my attorney calculated things correctly? There have been enough errors that I'm not trusting the numbers I'm seeing at all. I need to be able to figure this out for peace of mind that I'm not getting completely screwed over. I appreciate the reply...that helped confirm that at least part of my thought process was accurate!

I think that the multiple amendments is what helps fuel the Chapter 13 Trustee. Think of it this way. You file a form and it says you have $1,800/month in disposable income. You don't like that number, your attorney amends and says "no, wait, it's only $1,400 a month." Then, weeks later, another amendment comes in and says "one more time, we have it correct this time... the number is $1,100 a month." The could and should raise the ears of the Chapter 13 Trustee.

Let me end with this. Filing a Chapter 13 as a sole debtor, with your spouse being a non-filer, will always draw the most scrutiny. Especially when you put any number on the marital adjustment line. Every single $1 on that line must be proven and not just what the debtor believes the spouse spends on their specific debt. For example, every single $1 on that line should be proven through a credit card statement, and other receipts specifically for that person, that is also not included in any of the USTP allowed expenses.

What you're going through is what just about every single married-but-filing-solely goes through when the other spouse has income and money is "diverted" away from the bankruptcy estate. Filing this way is a good strategy, to protect the other spouse's credit where you have no joint creditors, and can make the bankruptcy more palatable. But, it comes with great scrutiny.

I can't tell yet if your attorney is making mistakes or it's a combination of filing too quickly (before really getting into the numbers and having a near perfect filing) or simply things missed. But remember, just because the Chapter 13 Trustee says they don't like this and that, doesn't mean that a judge won't confirm the plan over the objection of the Chapter 13 Trustee. Judges do this on many occasions, although it's not routine to overrule the Trustee's objection. The court usually wants the Chapter 13 Trustee and the debtor (debtor's attorney) to negotiate and/or fix the issues with confirmation.

Feel free to ask more questions.

[Ready2BDone]

There was only one amendment done where the marital adjustment was changed. The other adjustments were adding/removing the joint debts to the plan. I think there is a clear misunderstanding on the joint debt payments being included in the marital adjustment amount based on the email I quoted in my previous post. When the marital adjustment was done, I had provided a statement for each debt that totaled the amount we were claiming for the marital adjustment. Is that something that he should have also sent to the trustee? It would show that the cards are not in use and would validate the numbers we are giving them. I don't suppose there is an option to have a call with the trustee to iron this out? Or write a letter? I don't think my attorney grasps what I'm saying at all and has become rather argumentative (I think he's over this case).

I know that my issue isn't that the creditors would have received more in a CH7, so the only issue is the DMI, which I can prove through statements. If that is the only objection, and I have statements...how can they not confirm a plan where I'm paying an amount equal to my DMI even if they are trying to look at the case under a magnifying glass?

If I have this case dismissed, can I immediately refile with a different attorney or on my own (since I have the forms and know what to put)? Would that allow me to draw a different trustee so I can start fresh? I just feel like there have been a lot of mistakes made in the information provided to the trustee (he missed including debts, had figures wrong, etc.) that it would be easier to just start over.

[justbroke]

Is that something that he should have also sent to the trustee? It would show that the cards are not in use and would validate the numbers we are giving them. I don't suppose there is an option to have a call with the trustee to iron this out? Or write a letter? I don't think my attorney grasps what I'm saying at all and has become rather argumentative (I think he's over this case).

A Chapter 13 plan is part art and part negotiation. The Trustee and the attorney will go back and forth on things. Unless your attorney asks you to write a letter, things are explained by documentation. Whether or not the Trustee will think that it is sufficient is the entire reason for the back-and-forth. It's part of the dance.

I know that my issue isn't that the creditors would have received more in a CH7, so the only issue is the DMI, which I can prove through statements. If that is the only objection, and I have statements...how can they not confirm a plan where I'm paying an amount equal to my DMI even if they are trying to look at the case under a magnifying glass?

It's a negotiation and, as I wrote, you will be under strict scrutiny because one of you is not filing and that non-filing spouse has income. Please realize that a statement is not enough. The question is, how much of that income is used to actually pay expenses of the household where it is already included in the Schedules. It's a negotiation so eventually this will come to a "final" or evidentiary hearing of confirmation. If you have been communicating with your attorney just through emails and phone calls, I highly recommend a sit-down so that there is a meeting of the minds.

If I have this case dismissed, can I immediately refile with a different attorney or on my own (since I have the forms and know what to put)? Would that allow me to draw a different trustee so I can start fresh? I just feel like there have been a lot of mistakes made in the information provided to the trustee (he missed including debts, had figures wrong, etc.) that it would be easier to just start over.

If you refile, you may be subject to the serial filing rules and any new attorney would need to file so-called first-day motions (to keep the automatic stay).

For Chapter 13s, there is usually only one Chapter 13 Standing Trustee for a division of a bankruptcy court. Larger divisions may have 2 Chapter 13 Standing Trustees. A lot has to do with population and the amount of cases filed annually under Chapter 13.

[NoMoney30]

I'm sorry you're going through this! It didn't take us over a year to get confirmed but it felt like it! I think it was actually 10 months. I am also a very over the median filer and basically got treated like scum because I should be able to pay my bills. Which is fundamentally correct yes but they were just nasty to me. Even my lawyer made me cry once. We started out with a 2000 a month payment which seemed reasonable to me but the trustee kept saying they were missing income and the numbers didn't add up. They fought me on lots of my expenses but a lot of the pain was because my lawyers were bozos and didn't prepare me better. They told me to change my 401k contributions and I told them I would be getting a raise and a bonus around the time of filing and they were like no big deal we factored that in! They didn't really factor it in and the trustee was hella confused by our numbers. I should have waited a lot longer to file till my income statements had leveled out from all the changes but they said don't worry about it we have a pretty laid back district. So, in my 6 month look back period I had a raise, a 401k change (increased it to the max allowed) and a bonus. Not to mention, my company's healthcare rates increased. So, in actuality my net pay was 50 dollars less after the raise than it was before. Everyone kept fighting me cause they are like you got a raise you have more money and I'm like show me where this mysterious money is?!? I was like its right there....less net pay... my attorney was such an ass ...my raise was only 3k a year and he's like that's a lot of money!! I'm like say what? That's like 50 bucks a paycheck and my healthcare went up...so buy buy raise.

Anyhoo... the trustee had proposed their own plan and said I should be paying 2,900 and then I could keep any raises, bonuses or refunds. But I kept fighting it cause if you factored in the "allowed" expenses they had for me with this new payment, my DMI was actually negative but they couldn't see that. So, my attorney agreed to redo the entire thing from scratch but he said we're going to use an entire 12 months of pay. After he did that, he calculated the payment to be 3,400... I was livid. He said the numbers don't lie and I'm like its not right... but he said I should just take the trustee's offer and "suck it up".

If I can get confirmed... I'm sure you can. You just have to wait it out and hope your lawyer will do well by you. I can't afford my BK payment but we have been somehow making it work... scrapping by. My son will be out of his preschool program now for the rest of the year, so that saves me 185 a month. I'm only in a 60% repayment so I can't see why they would be giving you such a hard time in a 100%.

[Ready2BDone]

NoMoney30 onThanks for letting me know I'm not in this situation alone! I'm sure my attorney is over this (as evidenced by emails that start with "I don't know that I can do this anymore". But the numbers DON'T add up. I'm not an idiot...while some of the more law-technical things may not make sense, that math should! Its so frustrating that they are trying to force me into a payment that per their own forms I can afford.

justbroke Before I make things worse for myself...let me ask. Say I withdrawal the current filing and file again joint. Pro se.

I would take the forms I have that are completed by my attorney. I can change out the income number to reflect the most recent. I would remove the marital adjustment. Do I need to change anything else? Where can I find what the exemption maximum is? Just so I can make sure that a joint filing would still allow our assets to be completely exempt? I've looked on a few website, but can't find anything that would spell that out. In that scenario, without the trustee being able to argue about the marital adjustment (and assuming all assets are exempt), would the DMI I calculated at that point, be my payment? Or is there another factor to consider? What would happen to the money I've paid into the existing plan already? I'm so pissed that I've been at this for over a year and am looking at starting all over. I refuse to put myself in a situation that is worse than where I'm at though, so I want to be sure I've got all the necessary information before I start over.

[NoMoney30]

Yup... totally agree with you. The math on mine didn't make sense either... ultimately I had no choice to accept a payment I can't afford. After going through all the BS to increase my 401k etc... after I was confirmed I did away with it and I have to rely on any "extra" money I can find to stay afloat. The stimulus check is also going to be a Godsend this year because I owe 2000 on my taxes.

[justbroke]

justbroke Before I make things worse for myself...let me ask. Say I withdrawal the current filing and file again joint. Pro se.

A Chapter 13 Pro Se is not recommended. Especially since you already filed and the next Trustee (or same Trustee) will see and reference the prior filing.

Getting a Chapter 13 Plan is frustrating especially when the attorney and the debtor just don't see eye-to-eye. I hated my attorney, but they got me through it (I was self-represented). Since I said this is part art (skill and experience) and part negotiation, I can't recommend heading down the Pro Se path despite my success.

As NoMoney30 wrote, attorney can be argumentative. Actually, they are argumentative and I don't know why many of them just don't step back and listen to their client. That's why I suggested a sit-down so perhaps you can walk through the numbers in their system (as they most likely use Best Case Bankruptcy).

If you want, go download Best Case Bankruptcy and play with it. It's in demo mode when you first get the software. It's also the software used by most Trustees (the other popular one being Bankrupter.)

[Ready2BDone]

I'd humbly agree that pro se probably isn't the best way to go. lol
That being said...I DO want to run all the numbers and such myself so I know what my payment should be before my attorney presents me with whatever he comes up with. He's already preparing me with statements hinting that the payment would drastically increase. I just want to have confidence that the calculations are accurate.

Does the software you mentioned allow me to run the whole thing through? Meaning, it would show me my DMI and such? Do they also calculate the plan payment, or is that some formula that is done manually by an attorney?

I appreciate all of the information you've given me...it has actually taken a lot of stress off my mind as I'm understanding things a bit more. So, thank you. So much!

[justbroke]

Best Case Bankruptcy is the complete software package. It just doesn't allow you to file or print (and if it does print it will have the word "D E M O" all over the place). I think that it only runs on Microsoft Windows.

As for calculating the plan payment, that's where the art comes in. While the Means Test will give you the DMI and Schedule I/J will give you another DMI, you need other things to balance that out (such as your actual income and not the lookback). You do that by tweaking Schedule J. And, your number will still be different than your attorney and your Trustee because it's all about how the numbers are plugged in.

[Ready2BDone]

It should give me a ballpark at least, right? In other words, we shouldn't have a payment that has a $1200 difference?

[justbroke]

It depends. That's the art. But the base means test should be the same. It's the art in Schedule J that's the kicker.

[Ready2BDone]

So. If I am able to confirm that the creditors would not have received more in a CH7 (making mine an "easy" case), then would I not just take the DMI as my payment? If all of our assets are in fact, completely exempt...then the rest of our stuff is pretty straightforward. Which is also why I want to find out what my available exemptions are. This will definitely turn my brain to mush by the time its over. lol